Inventories rise only tepidly even as sales increase

Sales clerk Tanisha Thompson arranges T-shirts inside the new Nets Shop by Adidas in the Coney Island neighborhood of Brooklyn in New York. The government reports how much U.S. businesses adjusted their stockpiles in May on Monday, July 15, 2013. (AP Photo/Mark Lennihan)The Associated Press

The Commerce
Department said Monday that business stockpiles rose just 0.1 percent in
May from April, half the previous month's increase.

Sales increased 1.1 percent in May after being flat in April. That's the best gain since February.

Slower
restocking could weigh on economic growth in the April-June quarter
because it means companies ordered fewer factory goods. But the strong
sales gain suggests companies may have to order more goods in the coming
months to keep up with demand. That could drive more economic growth in
the second half of the year.

Many analysts think economic growth
has slowed to an annual rate of around 1 percent or even less in the
April-June quarter. That would lower than the subpar 1.8 percent annual
rate from January through March.

Economists expect growth should
rebound in the second half of the year to a roughly 2.5 percent annual
rate as the effects of federal tax hikes and government spending cuts
fade.

The May increase brought total stockpiles to a seasonally adjusted $1.66 trillion. That's up just 3.8 percent from May 2012.

The
brighter second half outlook is bolstered by steady job growth, which
has kept consumers spending. Employers have added 202,000 jobs a month
through the first six months of this year. That's up from 180,000 in the
previous six months.

The increase in hiring has helped overall income grow, offsetting some of the drag from higher taxes.